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Can the market be beaten?

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Roboticus Aquarius
Roboticus Aquarius
4 months ago

Of course it can. Oh, you mean consistently and by a large enough margin to be meaningful to your portfolio? Not so much, no.

Lucky for most of us that it’s not necessary. Market returns are enough to build a solid retirement stash.

Philip Stein
Philip Stein
4 months ago

Isn’t the appropriate question “Can the market be beaten often enough over the long-term to yield superior results?” Academic research on the net returns of both professional and individual investors appears to conclude that the answer is “highly unlikely.” Yes, there are outstanding individuals who have enviable long-term performance records. But they are rare and difficult to identify before the fact.

You can try to beat the market and succeed in some years. But over an investing lifetime, I suspect you will underperform after costs are considered.

Perhaps a more pertinent question is “Do you have to beat the market to reach your financial goals?” I believe the answer is a resounding NO.

Purple Rain
Purple Rain
4 months ago

The “stock market” is a “market of stocks”. I win when my income exceeds my expenses.

Rick Connor
Rick Connor
6 months ago

Yes, but not by me. I don’t try.

Marc Bisbal Arias
Marc Bisbal Arias
6 months ago

This is a question that could be answered in a very long way, but my simplified view is that yes, it can be beaten but with a caveat.

In the short term it is easier to do so. Over long periods of time, we have the issue that Mike Zaccardi brought up in a comment below: when you have millions of individuals trying to beat the market, you’d expect some to do. Which brings us to the point of luck vs. skill: were they successful because they’re good or because fortune favored them? It’s a tricky question.

I believe the market can be beaten over the long haul, but it’s no easy task. Even though I believe some people can do it due to superior ability, my guess is that it’s something only available to a minority of investors who try.

Richard Gore
Richard Gore
6 months ago

For some people this question seems to take on religious fervor. I say yes, and I’m happy to try.

parkslope
parkslope
6 months ago

If the market could be beaten I don’t think we would still be asking this question.

Richard Gore
Richard Gore
6 months ago

Which market are we talking about? What is the appropriate benchmark for a portfolio manager with a go anywhere style?

johntlim
johntlim
6 months ago

Yes, over the short term, but your odds (and your fund managers’ odds) fall precipitously over time. Probably less than a 10% chance of outperforming over a ten year span or longer. To put it another way, by investing in low cost total market index funds, you are likely to outperform 90% of other investors in the long run.

Mike Zaccardi
Mike Zaccardi
6 months ago

Of course it can. Deciphering luck from skill can be a challenge, however. But just look at folks like Buffett, Simmonds, Miller, Lynch – tremendous returns over along periods of time. Consider that there have been million of people who have attempted to ‘beat the market’, and these are the standouts. Could it be that they happen to lie on the far right tail of the distribution? Perhaps.

Regardless, individuals should stick to tried & true investing methods like putting money to work in the stock market via low-cost, diversified funds and use strategies like tax-advantaged accounts and rebalancing. Period investing that way will reap benefits over the decades. And you won’t pull your hair out trying to beat Mr. Market!

Joe Kesler
Joe Kesler
6 months ago

I wouldn’t recommend trying to beat it. We can beat the roulette wheel when the odds are only 48% in our favor when we get lucky for awhile. Eventually the odds stacked against us will catch up. In the same way, some beat the market for awhile through luck, although they may convince themselves it’s their keen insight into stock patterns or some other nonsense. But filtering out random luck, I don’t know anybody that can consistently beat owning the entire market through low cost index funds.

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